BB&T Capital Markets Secures $53 Million in Capital for Aldersgate

Transaction Summary

On May 18, 2017, BB&T Capital Markets priced a $19.1 million fixed rate bond financing (Series 2017A Bonds) for Aldersgate United Methodist Retirement Community, Inc. The bond proceeds will be used to refinance an existing bank loan and fund the remaining construction costs for the renovation of a community center. Simultaneously with the Series 2017A Bonds, Aldersgate has also obtained approximately $35 million in bank financing to fund the construction of 62 new independent living units and routine capital expenditures. Both transactions closed on May 31, 2017.

BB&T Capital Markets obtained the lowest 30-year fixed interest rate to date in 2017 for a non-rated Life Plan Community.

Testimonials

“We could not ask for a better financial advisor and business partner. The team at BB&T Capital Markets always applies its seasoned and extensive experience to each of our unique situations and recommends well-reasoned, appropriate options for our consideration. When regulatory or market challenges arise, and they always do, BB&T Capital Markets provides real-world workarounds and then stays involved until each of Aldersgate’s projects is completed.”

Thomas R. Lawing Jr., Chair, Board of DirectorsAldersgate United Methodist Retirement Community, Inc.

“We’re always grateful for the high quality work and successful outcomes that the folks at BB&T Capital Markets provide to Aldersgate. We’ve appreciated the skill set, the experience and the thoughtful guidance that BB&T Capital Markets has shared with our board and leadership as we continue to implement this phase of our strategic journey, and we are thrilled with this most recent transaction. We have always felt that John Franklin and his team not only do ‘great business’ but truly have the best interest of the mission and vision of Aldersgate in the forefront of their minds as they counsel and shepherd our organization.”

Suzanne Hodge Pugh, President and CEOAldersgate United Methodist Retirement Community, Inc.

About the Companies

Founded in 1945, Aldersgate is a not-for-profit mixed-model Life Plan Community in Charlotte, N.C., located on a 231-acre site that includes beautiful azalea gardens, nature trails and fields for walking/hiking, as well as an executive three-hole golf course on the premises. The existing community includes 248 independent living apartments and cottages, 47 assisted living units, 61 memory support units and 100 skilled nursing beds.

Financing Structure

In 2011, management discussed its strategic future initiatives with BB&T Capital Markets. Plans for the community included an expansion to the healthcare complement, along with an expansion of the independent living component. As these plans would likely involve a significant amount of debt, it was determined that Aldersgate would need to review its capital formation strategy. To create maximum strategic flexibility, Aldersgate chose to restructure its existing Series 2009 and 2010 bank debt to non-rated fixed rate bond debt in 2013. BB&T monitored the markets in late 2013 – a period in which the Federal Reserve’s announcement of its decision to taper its bond buying program caused tremendous turmoil in the municipal markets – and successfully priced the $38 million Series 2013 Bonds.

After the completion of the refinancing in 2013, BB&T Capital Markets continued to work with management and the project team to develop a financing plan for the healthcare project, which included 16 new memory support suites and a new 120-bed nursing center. To ensure construction would start in time, Aldersgate obtained an interim bank loan in early 2015 to fund a portion of the memory support suites construction. In case the permanent financing for the remaining healthcare project faced any delays, the interim loan would still enable a timely construction start of the project. The permanent financing was completed in late 2015 via a $49.2 million fixed rate issue with very positive institutional and retail participation. Following the issuance of the Series 2015 Bonds, the same financing team worked to develop a plan to finance the last phase of the strategic plan formulated in 2011. This phase included the renovation of the existing community center and addition of 62 new independent living units.

Financing Results:

The project team decided to obtain a taxable bank loan in mid-2016 to finance the renovation of the existing community center to assist with the marketing of the new independent living units and to utilize bank debt due to the ability to drawdown the loan. The ability to refinance the bank loan with fixed rate bonds was placed into the financing documents so that option would be available in 2017 when the financing of the new independent living units was planned. In early 2017, BB&T approached the lender of the existing bank loan to gauge interest in funding all or a portion of the new independent living units as well as minor routine capital expenditures. It was ultimately decided that fixed rate bonds would be issued to refinance the existing bank loan and $35 million in new bank financing would be obtained to finance the independent living units. This is very advantageous to Aldersgate in that the community will avoid significant negative arbitrage by utilizing bank debt for the new construction projects.

The collaborative effort of the deal team led to the pricing of the Series 2017 Bonds on May 18, 2017. The financing was received extremely well by the market, with remarkable retail participation that absorbed over half of the transaction. In addition, nine institutional investors participated in the transaction. The broad distribution created a superior cost of capital compared to any nonrated Life Plan Community financing in 2017. The Series 2017 fixed rate bonds were issued with a final maturity of 2047 with yield ranging from 2.13 percent to 4.77 percent. Key factors in this success were BB&T Capital Markets’ industry-leading retail and institutional distribution capabilities, Aldersgate’s strong management team and recent improvements reflecting execution of its long-term strategic plan.

 

Healthcare

BB&T Capital Markets has a highly experienced team dedicated to the healthcare industry. Our senior living group has an annual financing volume that typically exceeds $1 billion in bond issues, loans and direct placements. Our Mergers & Acquisition Advisory team has executed more than 35 transactions generating in excess of $3 billion of aggregate consideration for clients over the course of their careers.

About BB&T Capital Markets

BB&T Capital Markets offers an integrated platform of equity and debt underwriting, M&A advisory, corporate banking, and sales and trading. Headquartered in Richmond, VA, with offices throughout the US, we have specific expertise within 10 distinct industry verticals including Automotive Aftermarket; Commercial & Industrial; Education; Energy; Financial Services; Food & Agribusiness; Healthcare; Logistics & Transportation Services; Real Estate; and Retail & Consumer. Our commitment to industry expertise, combined with our resources as one of the nation's strongest financial institutions, strategically positions BB&T Capital Markets to build lasting relationships and contribute measurably to the long-term success of our clients.

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